I was a latecomer to Reddit. I remember taking a quick look at it a few years ago and just not getting it. The self-styled ‘front page of the internet’ just seemed like a mess to me. But before long, I was a regular visitor. I’m not quite sure how and when that happened. But at some stage, it ended up in a head-to-head battle with Facebook for my attention – and Reddit won. Decisively.
These days, the r/Bitcoin sub-reddit is undoubtedly one of the key news sources for everything crypto. Sure, the commentary can be variable – everything from the most valuable, detailed and informed responses to the most puerile and misinformed nonsense that gets amplified in the Reddit echo-chamber. But in the depths of such chaos, the quality (usually) rises to the top. Which is, of course, the point of the voting system. They’ve had their problems in the past with such an inclusive model (“Traffic was never the problem. Everything else was“) but the reality is that the ultimate curation of content by a community of generally like-minded individuals is valuable.
There’s always been a synergy between Reddit and Bitcoin. Partly because there is a significant overlap between the demographics in the user bases. However, the other more subtle attraction is that Reddit has always struggled to raise money by targetting users with advertising content in the usual manner beloved of so many social platforms because of its users are anonymous. Indeed, Reddit were one of the first ‘big’ names to start accepting bitcoin in return for Reddit Gold back in February 2013.
Now with just under 175 million unique visitors a month, Reddit has turned into a powerhouse of content discovery with sub-reddits housing thousands of active communities of like-minded individuals. So when they announced a $50 million fundraising recently and promised to return some of that value to their users, the logic was clear.
The only problem of course is how they could actually do this. In the original blog post announcing the investment, they suggested that the investors in this round would return 10% of their shares back to the community. This idea then evolved into a suggestion that the company might create its own cryptocurrency (backed by 10% of the existing share capital of the business) which would then be shared out amongst the community.
The idea is brilliant. However, perhaps unsurprisingly in retrospect, the heavy current regulatory and legislative framework that underpins the public issue of shares appears to have put the brakes on their good intentions. So new hire Ryan X Charles has now just announced a new plan: the business is planning to issue something that they are calling Reddit Notes. It’s an interesting proposition, although the details still remain scarce. They have to build a conclusive case that proves that whatever they give to users is absolutely 100% not share equity if they want to avoid the risk of serious criminal penalties that tend to follow the illegal public offering of shares. But it looks at this stage as if they are developing something that is far more akin to a customer loyalty reward scheme that will be redeemable within the Reddit ecosystem.
It’s interesting to see both Colored Coins and Sidechains being mentioned as possibilities for delivering what is essentially a decentralised digital asset project. Both options present real potential in crypto-currency – as well as splitting opinions (so what’s new?) – within the community so it’ll be interesting to see which is chosen.
Put simply, the concept of Colored Coins simply means that an additional layer of information is added to certain bitcoins. This gives those coins certain attributes – effectively turning them into tokens which can then represent other assets. So by transferring a fraction of a bitcoin, you can also transfer ownership of the asset.
As for Sidechains, the topic really needs its own post. But in the meantime, check out Richard Gendal Brown’s succinct summary and LinkedIn founder Reid Hoffman’s blog post explaining why was part of the $21 million seed round into Blockstream, the company that are pursuing this idea. A potential game-changer given that it has the intention of significantly extending the functionality of Bitcoin, this has been one of the big stories of the year.
Again – put very simply – you send a bitcoin to a specific address. It remains cryptographically locked there whilst another asset is released for use upon a separate blockchain. At a later stage, this process can be reversed. If all goes according to plan, there are two huge results. Sidechains now encourage innovation to thrive because people will be free to try out ideas without worrying that they might damage Bitcoin’s blockchain. And secondly, it gives such innovations a far higher chance of success, given that these experiments can shelter under the protective wing of Bitcoin secure network.
It’s worth pointing out at this stage that whilst there is a significant optimism around sidechains, the concept remains theoretical until Blockstream delivers the first code in 2015. The Colored Coins technology on the other hand exists today.
I’ll be fascinated to see which way Reddit goes on this. The scene is developing so quickly that more efficient methods may very well arrive in 2015 (it’s worth remembering that Ethereum and Counterparty have only been around for under a year so far, for example). But whatever road they end up on, the experiment will be fascinating. It’s obviously interesting from the viewpoint of the crypto-currency community. But it’s also of much wider interest to anyone who is struggling with the question of how best to reward a community that has developed around your business. Done the right way, I’m a huge fan of tokenisation to incentivise and reward those in a community (see my post on Folding Coin for example) and the choices they make could provide some very valuable lessons for us all.
Given Reddit’s growth trajectory, this project is definitely one of the many key stories to watch in 2015.
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